“Mobility as a Service” May Upend Auto Insurers’ Business Models

The idea of buying software, platforms, even IT infrastructure “as a service” is one of the biggest conceptual changes to hit the technology field in recent years. The as-a-service model offers major benefits to corporate buyers, including lower capital expenditures, greater flexibility, and continuous updating and upgrading.

Here in Canada, Barrie Kirk, Executive Director at Canadian Automated Vehicles Centre of Excellence, recently predicted that car ownership will be replaced by a “Mobility as a Service” model in which driverless vehicles carry passengers to their destination, drop them off, and then continue again by picking up other customers. Drivers would pay for the service but would not own the vehicles.

Just as corporations buying software, platforms or infrastructure as a service avoid large capital expenditures related to building their own systems, customers buying mobility as a service would avoid the capital outlays involved in owning and maintaining their own cars.

The move toward autonomous vehicles is gaining momentum, but it is still too early to predict with any degree of certainty how the driverless car will affect the dynamic of auto ownership (and auto insurance). One thing is certain, however: Property and casualty insurers with a big presence in personal lines are looking very closely at the issue. The most extreme outcome would be the disappearance of automobile insurance in its present form, to be replaced by commercial insurance of fleets of driverless cars.

People will still be driving, owning and insuring automobiles for a number of years, but autonomous vehicles may turn out to be an extremely disruptive innovation. Insurers would be well-advised to explore a variety of possible scenarios in preparing for the self-driving future.